Copper edged lower as hotter-than-expected US inflation saw traders boost bets on the Federal Reserve hiking interest rates.
Futures on the London Metal Exchange fell as much as 0.6%, following their first weekly decline in since June. Most other major metal contracts also traded lower, hit by a strengthening dollar and broader pressure on risk assets.
Traders ramped up bets on a rate hike at the Fed’s meeting this week following Friday’s inflation print, though doubts remain about political pressure on the central bank. Tighter monetary policy is typically bad for non-yielding assets like metals.
The premium paid for spot copper over 3-month futures stood at $4.50 a ton on Monday, having narrowed sharply in previous weeks, a sign of supply tightness easing.
“With speculative length reduced but prompt tightness also easing, copper is likely to remain choppy around current levels until stronger dip-buying returns or a fresh macro or fundamental catalyst provides clearer direction,” analysts at Sucden Financial Ltd. wrote in a note.
Copper rallied to a record high last week driven by bets the US would impose tariffs on refined metal, leading to traders pre-preemptively shipping it to America in a bid to profit from a spike in domestic prices. Optimism over demand for the wiring metal for data centers and renewable energy, as well as supply setbacks at key mines, have also supported the metal.
Copper on the LME declined 0.3% to $14,193 a ton by 10:05 a.m. Singapore time. Zinc was down 0.7%, while aluminum was flat. Iron ore fell for the fourth straight session, dropping 0.4% to $97 a ton.
